By Merit Ibe
The Centre for the Promotion of Private Enterprise (CPPE) has lauded the bold step taken byPresident Bola Tinubu administration towards the unification of the naira exchange rate, saying it will boost government’s revenue by a minimum of N4 trillion through additional remittance of surplus to the federation account by the CBN.
The Centre also pointed out that the liberalisation of the foreign exchange market would unlock the huge potentials for investment, jobs, capital flows and positively impact investors’ confidence.
Director of the Centre, Dr Muda Yusuf, who made the remark, however opined that the CBN should position itself for periodic intervention in the forex market, as and when necessary, to stabilise the exchange rate and prevent volatility, saying this should happen not by fixing rate, but by boosting supply to the extent that the reserves can support.
Yusuf clarified that the unification was not a devaluation policy, but a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market.
“It is a framework which allows for flexible rate adjustments as and when necessary. The model is predictable, equitable, transparent and sustainable. It is a policy regime that would reduce uncertainty and inspire the confidence of investors, minimise discretion and arbitrage in the foreign exchange allocation mechanism.”
The CPPE boss explained that rate unification does not imply that rates will be exactly the same in all segments of the market, noting that rhe objective is to ensure that the differentials are very minimal, possibly between 5-10 per cent.”
Yusuf reeled out the benefits of unified exchange rate regime to the economy which include enhancing liquidity in the foreign exchange market. “It is more transparent as mechanism for forex allocation.
“It minimizes discretion in the allocation of forex and reduces corruption vulnerabilities.
It reduces opportunities for round tripping and other sharp practices.
It would increase disclosures with respect to export proceeds and compliance with non-oil export declarations, especially the non-oil export documentation [NXP].
“The use of naira cards for limited international transactions would be restored in the short to medium term.
It would facilitate the mopping up of naira liquidity in the economy in the short to medium term. This would impact positively on inflation outlook.
“It would deepen the autonomous foreign exchange market through the liberalization of inflows from Export Proceeds, Diaspora Remittances, Multinational oil companies, diplomatic missions etc.